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10 Most Bizarre Canadian Tax Rules That Will Make You Giggle

Preparing your annual tax return is a grind for most people. You may appreciate some levity in this time of drudgery: here are some weird and bizarre tax rules that will make you laugh or at least giggle. And who knows, you may glean some tax savings tips at the same time!

Hair Transplant Costs

Hair transplant costs paid to a doctor will generally qualify as medical expenses and will give rise to a Canadian tax credit. However, only medical expenses in excess of 3% of income will be eligible for this tax credit. Medical expenses can be claimed by either spouse.

Lottery or Gambling Winnings Are Not Taxable

Lottery winnings in Canada are treated as windfalls and are not subject to Canadian income tax. This is also true for gambling winnings, as long as the taxpayer is not in the business of gambling, because the income is not considered to be income from a business.Professional gamblers, however, to have to report their winnings.

Salary Paid to 11-Year-Old Deductible

In a recent Tax Court case, the court allowed the taxpayer to deduct $7,000 in expenses paid to his 11- and 13-year-old sons. The taxpayer testified as to the exact duties performed by each son, including the number of hours worked. He also testified that he paid his sons in kind rather than by way of cheque.

Employers are Allowed to Give Two Non-Cash Gifts a Year to Employees

CRA’s policy is that employers are allowed to give two non-cash gifts a year to employees without the employee having to include the gifts in income for Canadian income tax purposes, provided that the gifts total less than $500.

Medical Marijuana is Deductible for Tax; Vitamins are Not Tax Deductible

In a ruling dated August 24, 2015, CRA confirmed that registered patients under Health Canada's Marihuana for Medical Purposes Regulations (MMPR) who receive a prescription (authorization) for medical marijuana from a physician, and purchase cannabis from a licensed producer, may claim the cost of their cannabis as an allowable medical expense on their Canadian income tax return which can result in an income tax credit.

The general rules for claiming medical expenses under Canada’s Tax Act allows prescription medicines acquired for use by an individual taxpayer or spouse, when prescribed by a medical practitioner however non-prescription or over-the-counter drugs including vitamins cannot be claimed, even when prescribed by a physician.

Inactive Corporate Director is Liable For Corporation Taxes

A director, including an inactive director, or a corporation is jointly and severally liable with the corporation for failure to deduct, withhold or remit income tax, payroll or GST amounts required, along with any related interest or penalty. The same is applicable to the director of a non-profit or charitable corporation.

Change Of Use Of Principal Residence To Rental

If a taxpayer has completely converted his or her principal residence to a rental property, there is a deemed disposition of the property (both land and building) at fair market value. The resulting capital gain or loss must be reported in the year the change of use occurs. The taxpayer may elect to defer recognition of any gain to a later year,however, in order for the election to be valid, you may not claim tax depreciation (CCA)as a rental expense.

Most Legal Fees Incurred In Family Law Situations Are Not Deductible

Most legal fees incurred in family law situations are not deductible for Canadian income tax purposes. The main exception is for fees incurred to enforce a child maintenance order.Legal fees incurred in respect of a child support application are also deductible.

Parking Provided To Employees

Parking provided to employees may constitute a taxable benefit to the employee, requiring an inclusion on their Canadian income tax return. The taxable amount is the fair market value of the parking less any amount the employee pays for the space. If fair market value can’t be determined, such as parking in a mall, no taxable benefit results.

Cost Of Uniforms Or Other Specialized Clothing Not Deductible

Even though a job may require specialized clothing or uniforms, the cost of the clothes is not deductible for Canadian income tax purposes. Similarly, grooming costs such as facials, manicures, and haircuts for a professional such as on-air talent for television (news reporters and anchors) cannot be deducted.

Disclaimer:

"This article provides information of a general nature only. It is only current at the posting date. It is not updated and it may no longer be current. It does not provide legal advice nor can it or should it be relied upon. All tax situations are specific to their facts and will differ from the situations in the articles. If you have specific legal questions you should consult a lawyer."

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David J. Rotfleisch, CPA, JD, represented me in the Tax Court of Canada and in the Federal Court of Appeal . My income tax case went back to the 1980s but was only heard in 2008 and 2009 partially due to the complexity. It involved securities hedging and complex business, complex law and complex accounting issues. I was fortunate to find a lawyer who even understood the business aspect. The organization of David’s firm enabled this successful case to be completed in a cost effective manner, which I doubt the larger law firms could have achieved. I am delighted with his representation and would recommend him without hesitation.

Russ Witt, Toronto - Client

I first met David Rotfleisch when he acted for the vendor of a business I bought, Richards-Wilcox, over 20 years ago. My partner and I were so impressed by him that once the deal was complete we retained him as our tax and business lawyer. He has acted for us on all tax and corporate matters since then, including the sale of our successful garage door business to Raynor in the US and has represented Raynor on the Canadian aspects of various transborder transactions. If you need a tax or business lawyer, David has a broad grasp of tax and business law and is helpful and responsive.

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I am a serial entrepreneur, having been involved in different businesses over the years. David J. Rotfleisch has been my tax and business lawyer for over 20 years. He has helped me with complex income tax and GST/HST issues over the years, including tax prosecutions and a subsequent voluntary disclosure that was successfully submitted. I find him to be very experienced and knowledgeable and able to explain complex issues in very clear language. He has a passion for solving business and tax problems, not accepting CRA excesses and attacking CRA's abuses. David's professionalism , attention to detail and unrelenting persuit of justice for the"little guy" has given me comfort while the CRA wolves were pacing at the door.

E.P., Mississauga, Ont - Client

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I first met David Rotfleisch when he acted for the vendor of a business I bought, Richards-Wilcox, over 20 years ago. My partner and I were so impressed by him that once the deal was complete we retained him as our tax and business lawyer. He has acted for us on all tax and corporate matters since then, including the sale of our successful garage door business to Raynor in the US and has represented Raynor on the Canadian aspects of various transborder transactions. If you need a tax or business lawyer, David has a broad grasp of tax and business law and is helpful and responsive.

Ray Friesen Raynor Canada, Mississauga - Client

I own Hometown Electric, an electrical contractor that specializes in large display signs. David Rotfleisch has been my tax and business lawyer and advisor since I started in business more than 15 years ago. He is great at planning to reduce my taxes and keeping me out of any trouble with CRA. His planning and advice is clever and to the point and I rely on him without hesitation.

Doug Hishon, Jr. Hometown Electric, Toronto, Ont - Client

I have used David Rotfleisch as my business and tax lawyer for over 20 years. I own and publish Canadian Homes & Cottages Magazine, and David has been our go to lawyer for over 20 years. He has handled all of my business and personal tax issues as well as my will and estate planning. David and his team are very good at anticipating and handling issues before they develop into problems, and in solving unexpected problems. I would not think of going to any other lawyer.

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I am a chartered professional accountant and a partner with the national accounting firm of Collins Barrow. I have worked with David Rotfleisch on hundreds of client files over the last 15 years. He is my most accessible tax lawyer and the one that I frequently go to, especially since he also has an accounting degree. He understands the accounting side of the issues as well as the tax and business law considerations. He deals with tax problems in a direct and cost effective way. I strongly recommend him to anyone in need of a Canadian tax lawyer.

I am a long time professional bookkeeper.Â From time to time my clients need a Canadian tax or business lawyer for will or tax planning or have problems with CRA and have to file a Notice of Objection or Appeal to Tax Court, or have unfiled income tax returns and have to submit a Voluntary Disclosure.Â I have been working exclusively with David Rotfleisch's tax law firm for over 5 years.Â He and his staff are knowledgeable in tax and corporate matters, responsive,Â effective and provide cost effective tax solutions.Â I continue to refer clients to him and would recommend him to anyone who has need of his services.

Gail Carver, Bookkeeping in the Beach, Toronto, Ontario - Bookkeeper

As a tax CPA/CA I am always working with Canadian income tax lawyers to implement transactions or reorganizations, to provide income tax opinions for private or public deals and to carry out income tax litigation. I have been working with David Rotfleisch and his tax law firm for over 15 years. He has assisted me and my clients on all aspects of tax law. I enjoy working with him, he responds to phone calls and emails as soon as they are sent, he promptly reviews and comments on documents. I have only good things to say about him and do not hesitate to refer him to my clients.

As a Partner at Sloan Partners LLP, Chartered Professional Accountants I am heavily involved in tax planning and tax compliance matters for a diverse client base.
To assist us in providing the best service to our clients, we use lawyers to help formalize and implement income tax planning arrangements. In those cases where
our clients are challenged by CRA, we need a lawyer skilled in tax litigation to defend their positions. My relationship with David J. Rotfleisch goes back almost 20 years.
David has always been available to discuss concepts and issues and to provide invaluable assistance to clients. Although clients always come first, we also enjoy chatting
about photography since we’re both serious about that too.

We are a Toronto tax law firm with a Canada wide full service income tax law practice. We provide comprehensive income tax planning including individual will and estate planning and estate freezes as well as tax representation from the tax audit stage through to full income tax litigation including rectification applications and tax fraud assistance.